CUSTOMER VALUE
Competition permeates the life and work of anyone involved in an exchange process such as selling. To help manage it, several theoretical frameworks have been developed for the minute parsing of those factors that give rise to it. Among the most influential of these theories in business studies are the five forces framework of Michael Porter (2004) and the concept of Core Competence of Pralahad and Hamel (1990). There are also other perspectives on the same issues, including one on technology (Meyer & Utterback, 1993), one on resources (Wernerfelt, 1984) and one on appropriate knowledge (Kogut & Zander, 1992).
The above competition theories are concerned mostly with the posi- tioning of the organization at the strategic level and, as a result, they are not helpful to salespeople who tend to focus on microscopic issues of the relationships and interactions between the organization and its customers.
There are no practical methods for translating the strategic analyses of these competition theories to recommendations that would be useful at an interpersonal level where salespeople operate. For the purpose of selling and sales management, we propose a new working approach for analyzing and managing the competition issues that salespeople face in the course of their jobs. This approach is practical and easy to use. It characterizes competition in terms of the abilities of the considered sales offers and their respective providers to deliver the customer value. Our intention is to re-focus the study of competition on the customer’s perception, which is the one that ultimately determines whether and where a seller could win a sale. This new approach, as readers will learn in this chapter, will not only 135
enable salespeople and sales managers to effectively assess their respec- tive sales performance in a competitive environment, but will equip both with a truly integrated framework that will help them analyze in a sys- tematic fashion their selling and sales management. The integrated nature of the approach is reflected in the logical relationships that are established between the X-Be elements, as discussed throughout the previous chapters, and the concept of competition which is, often, presented as an isolated subject in other frameworks. Such an approach to handling competition also helps ensure that a seller’s positioning in a competitive environment remains, in the end, a system of value positioning, which is consistent with our earlier account of the construction of the integrated product for the sales offer. This is especially true in high-competition sales situations, when your product is not much different on its own intrinsic merits from the competitors. As well, a practical tool for competition management will be presented to aid a seller in evaluating the overall competitive position of an existing sales offer in a target market.
A NEW DEFINITION OF COMPETITION
The majority of people working in business environments have at least some basic understanding of how competition affects their work. Com- petition is colloquially regarded as having two constituent elements: a competitor (which is to say, a similarly equipped and skilled seller or sales organization who targets the same market as the seller in question) and a competing product (which is roughly or wholly equivalent to the one being vended by the seller in question). But the head-to-head military nature of this definition imposes unnecessary boundaries on a seller’s management of competition and could be misleading; the seller may indeed become absorbed in the analysis of the differences between her product and her competitor’s, or in the disparities of experience or networking between the two competing parties. But no customer has ever abandoned a prospective purchase on these bases. Also, the above definition of competition implies that, if you are the sole supplier of a particular product or service, your only concern should be whether your potential customers are themselves competing with you, that is, whether they have the internal resources to solve the perceived problem or not; if they do not have these resources, then you should be able to sell very easily to them. But this reasoning is not correct; there could very well be other factors that act as obstacles against your sales work; for instance, the customers’ perception of their problems could be of such a nature that they think that your product or
A NEW DEFINITION OF COMPETITION 137 service is totally irrelevant to their needs. The colloquial definition is, therefore, necessarily incomplete as far as sales is concerned. It may also be misleading, as it tends to distract sellers from what should really be their main focus – the customers’ VOC which are the major factors that determine whether a sale is won or lost. What a competitor does is and should be considered secondary, as it will impact your sales work only if it succeeded either in providing more value to the customer than your own offer or in changing the customer’s VOC, leading to a change in the customer’s bases for judging of value.
X-Be proposes a fundamental renovation of the concept of competition that is similar in some ways to our earlier reconstruction of the term product; indeed, it is built, to a certain extent, upon it. The overall result might be termed integrated competition.
Integrated competition is the sum of all the factors that impede a customer’s recognition, acceptance, deployment, or employment (or con- tinued utilization) of a sales offer. Such factors, which will be referred to within X-Be as the impeding factors, can always be linked to a set of VOC-endorsed buying points and selling points that, in the perception of one or more key persons, the seller has difficulties delivering to the satisfaction of the latter key persons.
As can be seen in this definition, the presence of competitors and competing products or services has not been included in a head-to-head military fashion, as this was the case in the traditional definition of compe- tition. Rather, it is its possible influence on the customer’s buying decision that is incorporated into our definition, and this incorporation has been done from the customer’s point of view, not the seller or competitors (which is consistent with the overall customer-centric nature of the frame- work X-Be). Hence, the existence of a directly competing product is just one source, among others, of impeding factors that compete against a sales offer in satisfying the VOC of the key persons. It should also be noted that a factor that influences the sales process – for good or ill – can ultimately be viewed as a reflection of the customer’s personal/organizational values and social context.
Competition can thus arise at any time, before and even after (in the case of a service or supply contract) signing and closing a deal.
It is the salesperson’s responsibility to identify all those factors which are obstructing her efforts to position the sales offer at hand, maintain her sales relationship with the client, and trace the causes of these obstructions. To help the salesperson do so, the framework X-Be provides practical and easy-to-use tools to detect and manage these factors. Indeed, the extent to which an individual impeding factor may impact the selling could be
measured by the attitude index, the CI, or both, depending on whether the impeding factor acts on a buying point, a selling point, or both. By implementing these indices and the other X-Be concepts, the salesperson should ultimately be able to evaluate her ability to surmount the factors mitigating the sale, and thus be aware of her competitive position. The following section provides more details on this.
COMPETITIVE POSITION
To judge her current competitive position in a sales process, and improve it if it is not as strong as it ought to be, a salesperson could follow the following steps:
1. Identify the possible impeding factors in the sales process. While she carries out this identification, the salesperson should keep in mind the above definition of the terms “competition” and
“impeding factors.”
2. Evaluate the impact on selling of the identified impeding factors.
The salesperson could successfully do so by using the attitude index and CI that she has recorded with each of the key persons involved in the purchase process, provided that she enjoys a reasonable relating status index with each of these key persons individually.
In many cases, however, it may be unnecessary or
time-consuming to check what the impeding factors are for all key persons involved. In such cases, the salesperson could proceed a bit differently, but still remain effective. Once she identifies the possible impeding factors, it might be enough to just address the question of which key persons are likely to side with the identified impeding factors. It is not unusual to find out that these impeding factors would resonate more with those key persons with whom the salesperson’s relating status index is as poor as being at the “critical stage” or at the “PR stage”
(definitions of these stages have been presented in Chapter 1 and discussed in Chapter 8).
3. Assess your overall competitive position in the purchase process.
The salesperson could do so by checking on the respective influence levels of those key persons with whom she has a good relating status index (say, the “acquaintance stage,” or “partner stage” – definitions of these stages have also been presented in Chapter 1 and discussed in Chapter 8). Once she has done so, the
STRATEGIES IN MIXED COMPETITION 139 salesperson can assess her overall competitive position using the following logical rules:
a. You are in a relatively good competitive position if you have a good relating status index with those key persons whose influence levels on the purchase process are high, and these key persons believe that you, with the sales offer at hand, can successfully deliver their VOC-endorsed buying points and selling points.
b. You are in a worrying competitive position if the influence levels of those key persons with whom you have a good relating status index are not so high, although they believe that you can, with your sales offer, successfully deliver their VOC-endorsed buying points and selling points.
c. You are in a poor competitive position if even those key persons with whom you have a good relating status index do not believe you can, with your sales offer, successfully deliver their VOC-endorsed buying points and selling points.
d. You are in an unclear or mixed competitive position if none of the above is the case.
Unfortunately, it is this last type of competitive positions – mixed competitive position – that salespeople often face in the course of their sales process. However, the analytical method outlined above using X-Be’s indices can still be useful in guiding the seller to specifically parse the impacts of the identified impeding factors. It can also help direct her to the real concerns of the key persons in the purchase process and get her to think about how to deal with these concerns. In the next two sections, the selling strategies and tactics discussed in Chapter 4 are employed to shed some light on the mixed competition situation.
STRATEGIES IN MIXED COMPETITION
In any state of competition, the focus of a salesperson’s efforts should be the VOC of the key persons involved. This is especially true of a state of mixed competition, since that is one in which a sale can potentially be secured as long as sufficient effort is made to attune the integrated product to the customer’s values. Intimate awareness of a key person’s VOC is central to establishing which expressed and tacit VOC-endorsed buying points and selling points this key person thinks you have prob- lems delivering, and often working out just what these buying points and
selling points are is the trickiest part of doing business in a competitive environment.
Thankfully, though, there is a bit of a shortcut in practice. For, as veteran salespeople will note, most sales seem to occupy one of three value criteria categories – categories that start at a center (the product itself) and expand outward. To each one of them corresponds a different methodology for managing one’s competitive position.
1. Intrinsic Value Strategy – Sales centered on the intrinsic value of the product or service itself. This is the simplest sort of value positioning, and the sales situations it might represent can run the gamut from medical services in a private clinic to jewelry to complex proprietary technologies. IBM, for example, has long stressed the effectiveness of its product in solving customers’
problems. If the customer’s VOC indicate a foremost interest in the quality and dependability of the item changing hands – “a good, solid product” – over and above any social or
organizational factors involved in the purchase, then the competitive position should be improved by ensuring the deliverability upon those virtues of the product in question that are relevant to the key persons’ buying points and selling points.
As a matter of fact, this scenario is also and often identified in the sales of those products that are associated with “revolutionary”
technologies or that contribute to dramatic changes in social trends when they are successfully introduced in the market.
2. Extrinsic Value Strategy – Sales predicated primarily to the values of the purchasing process or environment. When the products offered by various sellers are not too different from one another or not different at all, then the intrinsic value of the product or service in question is likely of little consequence in influencing key persons to make a motion to purchase. Rather, their foremost interest (and the most salient of their VOC) could be in the rapidity of execution, convenience of administration, courtesy of auxiliary service, pleasantness of purchase
environment, or any values that are primarily embedded in the process by which a product is provided, used, and disposed.
Represented by this mode of integrated product in terms of customer value are, among other things, bank services, Internet retailers, commodity goods, and the like. As a result, improving one’s competitive position in situations such as these would necessarily follow from ensuring the deliverability upon the
TACTICS IN MIXED COMPETITION 141 customer’s buying points and selling points, as they relate to the purchaser’s needs of an environment and process of exchange that is as convenient and efficient as possible.
3. Relationship Value Strategy – Sales lubricated primarily by interpersonal or organizational relationship. In this case, the current product or service to be exchanged is, in actuality, something of a “pawn,” a token that indicates the development of an interpersonal or organizational relationship, and the fostering of connections and networked resources. These sales tend to be broad or strategic in the sense that the customer is seeking values that are external to a particular transaction of goods or services.
An example might be the office items sold periodically to the buyer with whom the salesperson has a good personal
relationship. These sales arise from a network of patronage or personal relationship, or what is termed ‘Guanxi’ (a Chinese word for relationship, representing a set of complex sociologic and interpersonal values entangled with business intercourses). The relationship value strategy can be more effective in the following situations: (1) there is not much difference among the sales offers (including their purchasing, using and disposal); (2) selling in the culture that favors much interdependence among people; (3) there is a strategic reason for a purchasing organization to partner with the sales organization. In any of these cases, the seller could work more effectively than otherwise by leveraging the relationship values.
In all likelihood, a competitive sale involves some combination of two or all three of the above categories, but one presumably prevails, and that should be a strategic path upon which the seller directs her efforts to understand buying points and selling points that drive the (purchaser’s) key persons (or at least the most influential of them) to the motion to purchase. By doing so, the seller will be able to examine and analyze the effective ways to strategically integrate the customer value into the customer-centered integrated product and, as a consequence, cultivate a strongest and long-term competitive position for herself and her company.
TACTICS IN MIXED COMPETITION
Necessarily, though, in most free market environments, a situation of mixed competition is also an opportunity for the seller to refine her sales
offer into a customer-centered integrated product, impress her customer, and ultimately beat the competition. As long as it has not been established clearly that the seller is in a desperate competitive position, there is still a chance for this seller to win the deal, and she ought to work hard toward achieving that goal. To do so, and as discussed in Chapter 4, she can make use of different tactics depending on how strongly the key persons feel about their VOC and the degree of their involvement in the purchase process:
• The “selling criteria” tactic:
If the VOC have not yet been established, and the key persons are still not sure about them, then the seller must find ways to become active in the process of “co-defining” what the criteria will be; in doing so, she can point out some of the important values or combination of values that were not fully appreciated before, and make sure that the final list of criteria for the purchase is
satisfactory to both parties (the buyer and the seller). This situation may happen when the product or service to be purchased is crucial or new to the company and may allow the seller to offer relevant expertise for the definition of the VOC when there is an extended involvement of key persons in the purchase process.
• The “changing criteria” tactic:
If, however, the VOC have, to a certain extent, already been defined, and the key persons are relatively clear about them, but still willing to seek external opinions about some specific
purchasing issues (which is typically the case for a medium level of purchase involvement), then the seller can use this customer’s purchase involvement to interact with the key persons involved, strengthen those criteria factors that are beneficial to both parties, and encourage changes in the key persons’ criteria so that they could see something better than what they had in mind.
• The “meeting criteria” tactic:
But, if key persons’ VOC are hardly changeable, then the seller might want to simply deliver more of the values that the key persons are looking for according to their existing VOC.
The seller can also work on the relevant buying points and selling points of her offer, to manage a mixed competition situation. She can
“tune” the presentation of these points to the needs and desires of the key persons, to the point that the newly customized integrated product becomes irresistible and the meddling voices of the competition and their impeding factors are muted. That being said, if customizing an integrated